Low CIBIL score

I recently saw that I have a low credit score. 2 years back my credit score was good. What could have happened?

Hi,

Here are some mistakes that could have pulled your score down.

No Debt = Good Credit Score

A common misconception among most first-time or young professionals is that no loans or debt can get them a good credit score. This line of thought often leads them to make cash purchases and keeps them away from Credit Cards. For credit rating companies like CIBIL, no loans/debt actually equals a bad credit score. Since the credit score of a person is rated based on their historical ability to pay off a loan, the absence of any credit history stops companies from determining whether you have the capacity to pay off a loan.

Applying For Too Many Credit Cards

While having no debt may not get you a good credit score, applying for too many credit cards can also have a detrimental effect. Whenever you apply for a credit card, the company sends an inquiry to CIBIL asking for your credit history. When CIBIL notices that there have been multiple requests within a short span of time, they’ll identify you as a person who has a lower ability to make payments and hence requires multiple lines of credit. So, do not fall prey to the lucrative offers from credit card companies and avoid applying for multiple cards.

Closing Your Credit cards After Repayments

Millennials often use credit cards for big purchases like buying home electronics or automobiles. After they pay it off, they make the mistake of closing the cards, which can affect the credit history. A healthy credit score will typically have a long-term credit history. Closing the card relinquishes that record and lowers the average credit score despite timely repayments and clearing off the debt. So, it is better to retain the card even after paying off the debt.

Being A Guarantor For Someone’s Loan

We often make emotional decisions when we’re young. Being a guarantor for a friend or relative is one of them. When you sign up as a guarantor, you become responsible for repaying the loan in case they default. If you’re unable to pay off the loan, your credit score is bound to be severely affected.

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Cheers,
BB Expert